SENIOR Minister Lee Kuan Yew said he was meeting union leaders to dispel their 'unwarranted gloom' and they in turn shared with him just how down they were feeling.

Uppermost on their minds: the pain of dealing with retrenchments and wage cuts.

He held out no sweet pills. The stark truth was this, he said: There is no other choice.

The pain workers have to bear now is the price of adjusting to the new reality of a global economy where companies take flight to more attractive locations.

To survive, Singapore just has to move up the technology ladder and while he could not predict where the new jobs will be, he said he was confident that they will come.

And he offered this hope: As companies streamline their operations and become more productive and workers re-train for the new jobs that flow in, this could mean better pay for workers in the end.

But right now, in these bad times, companies are at risk and if they do not lay off and trim down, they will be in trouble.

Now too, the old ways of companies carrying free riders cannot be sustained, he said, citing the experience of PSA Corp.

The subject of PSA arose after a union leader expressed a fear that the recent spate of retrenchments by public agencies and Government-linked companies (GLCs) was setting the trend for private-sector firms.

Mr Lee replied that the GLCs are run like private companies, not charities.

'We will be setting a bad example,' he said.

'It's the wrong approach if you believe that we can survive because since you are GLC, you are government, please, we can afford to be inefficient.'

In the case of PSA, he said while he had no doubt that it can survive, he was also certain that the port operator could not do so relying on old methods and wage structures, with 'the whole establishment carrying extra staff'.

Otherwise, 'it will die because Maersk has gone to Tanjung Pelapas, cheap land, cheap labour', he said, referring to the Johor port's coups when it pulled away the Danish giant and Taiwan's Evergreen Marine - two of Singapore's biggest shipping clients.

And if PSA folds, more workers would lose their jobs.

But if PSA trims its operations and becomes more productive, 'we will be able to pay our workers more than Tanjong Pelapas workers, and we will still be competitive'.

Likewise with the local banks, said Mr Lee.

The mergers between TatLee-Keppel and OCBC, and UOB and OUB, displaced more than 1,000 workers, a painful process.

But the banks had no choice other than to prepare for competition.

And having done so, they are now in better shape to face the bigger and leaner American banks that are set to enter the scene, with Singapore's signing of its Free Trade Agreement with the United States.

'You have to grow bigger, you have to become more efficient, you must have more financial products to sell and you must stay in the business.

'And if we want to be a financial centre, we have to upgrade and have world-class banks, not just Singapore banks,' he noted.

If unionists and workers can take comfort in anything, he had this to offer them: The problem is not unique to Singapore. It is a worldwide trend that even the United States at the leading edge has to face.

The key is to understand that 'life is a relentless process of attrition'.

'As you change, there are these attritions, there are these casualties as jobs are changed and you move from one job, retrain and go to another job,' he said.

Thus individuals, too, would have to adjust and remake themselves.

Mr Lee related the story of a banker, who made a complete switch into the hotel line to survive.

'He's in the hospitality industry. Working in a hotel, looking after people, greeting and meeting them. He changed jobs. Can't be helped.'

And as an encouragement to older workers - another hot topic with union leaders - Mr Lee told them of his own experience adjusting to change.

He had to spend months learning how to use a computer and e-mail when he found himself falling out of the loop with the younger ministers as he was using fax.

He warned: 'The day that we can't adjust and change, is the day that we begin to shrivel and die.'